The Ceylon Dollar Bond Fund (CDBF) that invests in Sri Lanka dollar sovereign bonds and bank bonds has recorded an 8.82 percent p.a. annualized return (10.60 percent p.a. in rupee terms) during the first quarter of 2016. The only dollar-denominated fund in Sri Lanka is managed by Ceylon Asset Management while Deutsche Bank is the trustee and custodian of the fund. The fund has been awarded a B+ rating by Fitch Ratings that mirrors Sri Lanka’s country dollar rating.
The tax exempted unit trust is operated out of Colombo and Singapore. The fund is open to investment exclusively for Sri Lankans living or working overseas, the Board of Investment (BoI) companies and all foreign nationals and companies. The fund is open to retail investors from US $ 1,000 upwards, as well as institutional investors who can invest via Singapore or Colombo.
The open-ended fund structure enables investor’s easy exit whenever they please, without being locked-in for a fixed deposit. The fund has invested in dollar-denominated sovereign bonds issued by the Government of Sri Lanka and dollar bonds issued by Bank of Ceylon, National Savings Bank and DFCC Bank. Ceylon Asset Management Economic Advisor and Director Rainer Michael Preiss in Singapore said, “The CDBF has been able to capitalize on high interest rates available in Sri Lankan bonds following the US Federal Reserve raising interest rates last December and Sri Lanka’s rating downgrade.”
Commenting on the fund, Preiss went on to note that as Sri Lanka’s economy gains momentum, the high interest rates will decline as the country’s rating is potentially upgraded once again.
“The Fed is unlikely to raise interest rates again in the near future. Therefore, investors should take advantage of the current interest rate scenario and a strong US dollar by investing in the CDBF sooner than later,” he pointed out.
“The returns on the Ceylon Dollar Bonds are attractive, compared to regional and international fund returns,” Preiss said, upbeat on Sri Lankan government plans to increasingly engage in international capital markets.
“The fund will surely attract foreign investor capital into Sri Lanka bonds,” he alluded.Ceylon Asset Management Managing Director Dulindra Fernando said, “The Ceylon Dollar Bond Fund has the potential to begin what non-resident Indians have done for Indian capital markets.”
“We believe it is time for Sri Lankan diaspora as well as Lankans living abroad, to begin investing in Sri Lankan capital markets due to attractive valuations available,” expressed Fernando.The CDBF has been approved for investment by the Central Bank of Sri Lanka, while it is the first dollar-denominated unit trust licensed by the Securities and Exchange Commission of Sri Lanka. Ceylon Asset Management is an associate company of Sri Lanka Insurance Corporation Ltd and Commercial Credit & Finance PLC.